Ask TaxTim

I am resident in SA, but from 2014 I want to try a new life whereby I spend 6 months (winter!!) out of the country each year. During this time I would be earning some money through freelance online work for various individuals or companies from various parts of the world, plus I would be getting rental income from two properties in South Africa. While in South Africa (during summer), I would continue this online work, and do some other ad-hoc freelance work for South African companies, or be earning money from selling various services to individuals.If I spend more than 183 days out of SA (and it would be in one continuous chunk), would I have to pay any tax at all on any of my income - whether from foreign sources, SA companies, or my rental properties?

As a tax resident of South Africa you are subject to tax on your world wide income regardless of where you earn it. Regardless of one's tax residency status all income earned from a South African source is subject to tax in South Africa, so for you that would be the freelance work, sales and rental income.

When you are out of SA and earn income from foreign companies, you should be paying tax on that income in those countries where you work, they will usually withhold some tax as you are seen as a foreigner. In most cases SARS will allows this tax paid to be offset against and tax paid in South Africa.

Given that you are what is called an "ordinary resident" of South Africa it is very difficult to cease to be a tax resident. You would need to establish that you have had the intention of permanently moving or at least relocating your "place of return after wandering" to be outside of South Africa. Once you have established that you would then need to demonstrate that you are out of SA for longer than 915 days over a 5 year period, but most importantly that in the first year you are only in SA for 91 days or less.

Freelancersays:12 March 2013 at 19:34

I'm still confused... so what's the 183 days out of the country all about?

The foreign clients do not withhold any tax. They are mostly very small businesses or even individuals.

There was a news item back in April 2011 about Graeme Smith choosing to stay back in India to get out of paying tax. The article says "Teammate Faf du Plessis unwittingly sparked media interest in Smith's absence when he said on a radio station after returning home that the outgoing skipper had stayed on in India to meet requirements which would exempt him from paying income tax back homeSouth African residents, who are out of the country for at least 183 days of a tax year with 60 of them being consecutive days, gain exemption from paying tax here." Presumably Graeme Smith's salary is paid by Cricket South Africa, so regardless of how long he spends out of SA, he must pay tax on it in SA. So perhaps this refers to his income earned from the Indian Premier League? But you say "As a tax resident of South Africa you are subject to tax on your world wide income regardless of where you earn it." So why was smith staying on in India to avoid paying tax?

TaxTimsays:13 March 2013 at 10:07

That particular requirement relates to individuals who are employed under contract and have an obligation to spend more than 183 days, of which 60 must be consecutive, then that portion won't be taxable. However it is a specific part of the Tax Act which won't apply to you given your circumstances. It is aimed at individuals who are sent away by their company for long periods to work and will be taxed in the country which they work in.

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